The next rise in AE contributions is unlikely to lead to any significant dip in member participation, according to the latest insight research from Nest.
Their research looked at member behaviour and attitudes towards savings for a pension before and after last April’s increase in AE contributions.
Surprisingly it found that half of member (51 per cent) didn’t notice an increase in pension contribution, while over a quarter (28 per cent) said this had prompted them to increase their contributions further.
Overall only a small majority of members thought that too much of their income went into a pension scheme.
Rather than producing a negative response to increased payments, this Nest research suggests higher AE levels boosted members confidence of being able to provide for retirement.
It also found found that after the AE contribution level increase, those aged over 60 were more likely to consider their pension as their main source of income.
The research did not find any evidence at all to suggest that there had been a negative impact on overall levels of debt or non-pension saving behaviours as a result of an increase to minimum AE levels.
Nest Insight executive director Will Sandbrook says: “There are extremely positive signs emerging from this research and reason to believe the next AE rise in April will result in a similar low impact on cessations and opt-outs.”
However he adds: “Whilst inertia has clearly been harnessed as a powerful force of good we do need to be mindful of the flipsides.
“In our surveys most members told us that they check their payslips but about half didn’t notice a change in their contribution amount. This low level of awareness suggests it’s unlikely that people are questioning whether they’re contributing enough.”
He says for those on lower and moderate incomes, who might otherwise expect to rely solely on the State Pension, auto enrolment is likely to provide a meaningful uplift in their retirement income.
But he points out: “Some people may need to take further action to achieve the retirement outcome they’re hoping for. Getting people to engage with retirement outcomes rather than inputs is the next step.”
Legal & General Investment Management, head of DC commented Emma Douglas adds: “This new research from NEST Insight helps to validate our assumption that the rise in contribution rates in April 2019 should have a minimal impact on opt-out rates.
“The survey also shows that people are still not engaged enough in saving for their retirement and whilst auto-enrolment is a step in the right direction it will not be enough for the majority of us to secure a comfortable retirement.”
She says the industry needs to do more to address this problem.
